THE LIGHTWAVE BLOG

A demographic view of the future

Alan Kohler, ABC Financial Reporter and Editor of the Business Spectator, is known for his somewhat quirky graphs that he uses to capture our attention and illustrate his point. One such graph recently captured our attention and is similar other view points we have considered about our future.  Now, as you know, Lightwave are not financial planners or business coaches however we have found some of these observations intriguing, if not disturbing, and we wanted to share our thoughts.

Alan’s graph below identifies the relationship between the average earnings of the stock market and the ratio of middle aged income earners and older non working people.  The graph shows a correlation between the value of the sharemarket and population age.  Not necessarily a great graph if you seek to make your fortune in equities.  It does provides opportunity and insight for those who see the need to reshape their business services and products.

To provide further understanding of this graph, the next image plots average household spending by age.  While this is US data, our demography and spending patterns are similar in this instance.  The population tends to really start spending from around age 30, increasing to a peak at around age 50 and declining from age 60 into retirement.

The next graph plots the Dow Jones Index and its correlation with  peak spending of the average household in the United States. The graph shows a remarkable increase in both average household spending and the Dow Jones Index from 1985 through to its peak around 2009.  The anticipated average household spend, derived from an understanding of the spending patterns of certain age groups and the total numbers of each group, will enter into decline from 2009 through to 2025.

So with an understanding of our future demographics, we now can look at what building and development cycles can be anticipated in the years to come.  The next chart illustrates the various real estate cycles that are generated by our needs and spending patterns. That part of the population that is predominant in population numbers will generally be influencing building booms of the real estate that is relevant to their age group.  For instance, when we are in our childhood year or late teens we need schools, colleges and universities.  As an average we get married at 26 and need rental apartments… newlyweds become shoppers and household spending increases at its fastest rate. By an average age of 31 we buy our first home and have kids.  As the kids grow, a trade up home is required between 35-42 and our spending peaks at age 46-50.  As we get older we seek vacation homes, then retirement villages and finally aged care communities.

All in all, some interesting trends and food for thought regarding the types of building and development required in the years ahead.

Written by Mark Walsh

Graph 1 Source: http://www.businessspectator.com.au
Graphs 2-4 Source: The Great Depression Ahead by Harry.S.Dent